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More thoughts on LPA 6 February 2014

 

 

The news today from Bombardier, in relation to its £1bln contract to provide trains for the Crossrail service,

could bode well for Saffron Walden based LPA.  

 

I am clearly not alone in such thinking, as the shares duly trotted up a few pence, closing at 86p which values the company at £9.6m.

 In terms of anyone taking a look at this one though, questions can be asked,  what about the substance of such optimism, particularly in relation to a company with such a small cap valuation and where those would be investors often complain at the large spread, or for that matter the difficulty in acquiring shares in any quantity.  

 

Firstly, the company has worked with and for Bombardier amongst others over a number of years in an Industry that is actually highly difficult for new entrants to get a foot in the door.

 

There are various reasons behind this, but in short, we are talking expertise, know how and a high end optimum performance.

LPA would appear to meet the criteria on all fronts, is well versed in the sector and as a result, should certainly be perfectly placed to tap into the significant opportunity this has presented.

While the injection of serious money and the subsequent upgrades has been talked about for a considerable time, it does at last look as though the time for delivery has come.

 

 There is and has been for a prolonged period a requirement for the life extension of between 1,200-2,000 rail vehicles to be addressed from this year up to 2018, along with procurement for an additional 4,000 new vehicles which not only includes Crossrail but Thames Link too.

Given the announcement today, LPA should hopefully be sitting in a sweet spot in terms of future uplift from the area as a whole and the news from Bomabardier turns the spotlight onto that.  

Additionally, any news on the European Train Control System where the aims are to standardise and harmonise various areas such as signalling, train protection systems, along with locomotives and rolling stock, could also present further opportunities for the company.

Of course, I am speculating to a degree here and until the company delivers tangible news from its own quarter, it remains just that.

However, LPA as I have commented previously, sounded an upbeat tone on this area in the preliminary results and I surmise Investors here will be keeping a watchful eye for any news on this front in the coming months.

 

The balance sheet is in decent shape now too following the land sale and no doubt, management will be eager to ensure that the relocation goes according to plan, which will also set the business up for further delivery.

All investors, as I have often commented, have their own measurements and applied criteria and no doubt, there will be those to whom LPA does not appeal.  

From a personal perspective, I continue to feel that the market cap, in relation to future prospects and earnings, along with a strengthened balance sheet justifies my keeping an ever watchful eye on LPA.

 

As an aside, I have been trying to catch up with management for a few more words, but as yet, they have been rather busy.

However, with the AGM looming hopefully that will happen, in order to add a few more thoughts.

 

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